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0 4 Completing the Accounting Cycle 0 After studying this chapter, you should be able to: Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements. Prepare financial statements from adjusted account balances.

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0

4

Completing the Accounting Cycle


0

After studying this chapter, you should be able to:

  • Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.

  • Prepare financial statements from adjusted account balances.

  • Prepare closing entries.


0

After studying this chapter, you should be able to:

  • Describe the accounting cycle.

  • Illustrate the accounting cycle for one period.

  • Explain what is meant by the fiscal year and the natural business year.

3


0

4-1

Objective 1

Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.


0

4-1

5


0

4-1

Spreadsheet (Work Sheet)

Trial Balance

Adjustments

Adjusted TB

AccountsDrCrDrCrDrCr

Accounts are listed in the Trial Balance column using the ending balance found in the general ledger.

6


0

4-1

Spreadsheet (Work Sheet)

Trial Balance

Adjustments

Adjusted TB

AccountsDrCrDrCrDrCr

Adjustments are entered here. Two possibilities:

1. Deferrals – Existing balances are changed.

2. Accruals – New information is entered.

7


0

4-1

Spreadsheet (Work Sheet)

Trial Balance

Adjustments

Adjusted TB

AccountsDrCrDrCrDrCr

Adjustments are combined with the trial balance. Account balances are now adjusted.

8


0

4-1

Spreadsheet (Work Sheet)

Adjusted TB

Income State.

Balance Sheet

AccountsDrCrDrCrDrCr

Revenue and expense balances in the Adjusted Trial Balance column are extended to the Income Statement column.

9


0

4-1

Spreadsheet (Work Sheet)

Adjusted TB

Income State.

Balance Sheet

AccountsDrCrDrCrDrCr

Asset, liability, owner’s equity, and drawing balances in the Adjusted Trial Balance column are extended to the Balance Sheet column.

10


Example Exercise 4-1

0

4-1

The balances for the accounts listed below appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet (work sheet). Indicate whether each balance should be extended to (a) an Income Statement column or (b) a Balance Sheet column.

  • Fees Earned

  • Accounts Payable

  • Rent Revenue

  • Supplies

  • Amber Bablock, Drawing

  • Utilities Expense

  • Accumulated Depreciation—Equipment

  • Unearned Rent

11


Follow My Example 4-1

0

4-1

  • Balance Sheet column

  • Income Statement column

  • Balance Sheet column

  • Balance Sheet column

  • Income Statement column

  • Balance Sheet column

  • Income Statement column

  • Balance Sheet column

For Practice: PE 4-1A, PE 4-1B

12


0

4-2

Objective 2

Prepare financial statements from adjusted account balances.


0

4-2

To balance sheet

14


0

4-2

(Concluded)

From statement of owner’ equity

15


Example Exercise 4-2

0

4-2

In the Balance Sheet columns of the end-of-period spreadsheet (work sheet) for Dimple Consulting Co. for the current year, the Debit column total is $678,450, and the Credit column total is $599,750 before the amount of net income or net loss has been included. In preparing the income statement from the end-of-period spreadsheet (work sheet), what is the amount of net income or net loss?

16


0

4-2

Follow My Example 4-2

A net income of $78,700 ($678,450 – $599,750) would be reported. When the Debit column of the Balance Sheet columns is more than the Credit column, net income is reported. If the Credit column exceeds the Debit column, a net loss is reported.

For Practice: PE 4-2A, PE 4-2B

17


Example Exercise 4-3

0

4-2

Zack Gaddis owns and operates Gaddis Employment Services. On January 1, 2007, Zack Gaddis, Capital had a balance of $186,000. During the year, Zack invested an additional $40,000 and withdrew $25,000. For the year ended December 31, 2007, Gaddis Employment Services reported a net income of $18,750. Prepare a statement of owner’s equity for the year ended December 31, 2007.

18


0

4-2

Follow My Example 4-3

GADDIS EMPLOYMENT SERVICES

STATEMENT OF OWNER’S EQUITY

For the Year Ended December 31, 2007

Zack Gaddis, capital, January 1, 2007$186,000

Additional investment during 2007 40,000

Total$226,000

Withdrawals$ 25,000

Less net income 18,750

Decrease in owner’s equity 6,250

Zack Gaddis, capital, December 31, 2007$219,750

For Practice: PE 4-3A, PE 4-3B

19


0

4-2

A classified balance sheet is a balance sheet that was expanded by adding subsections for current assets; property, plant, and equipment; and current liabilities.


0

4-2

Cash and other assets that are expected to be converted into cash, sold or used up usually within a year or less, through the normal operations of the business are called current assets.

  • Cash

  • Accounts Receivable

  • Supplies


0

4-2

Notes receivable are written promises by the customer to pay the amount of the note and possibly interest at an agreed rate.


0

4-2

Property, plant, and equipment(also called fixed assets) include assets that depreciate over a period of time. Land is an exception as it is not subject to depreciation.

  • Equipment

  • Machinery

  • Buildings

  • Land


0

4-2

Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called current liabilities.

  • Accounts payable

  • Wages payable

  • Interest payable

  • Unearned fees


0

4-2

Liabilities not due for a long time (usually more than one year) are long-term liabilities.

  • Notes payable

  • Mortgage payable

  • Bond payable


0

4-2

Owner’s equity is the owner’s right to the assets of the business. Owner’s equity is added to the total liabilities, and the total must be equal to the total assets.


Example Exercise 4-4

0

4-2

The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007 balance sheet of Hindsight Consulting.

  • Jason Corbin, Capital5.Cash

  • Notes Receivable (due 6.Unearned Rent

  • in 6 months)months)

  • Notes Payable (due in7.Accumulated Depr.—

  • 2009) Equipment

  • 4.Land8.Accounts Payable

27


0

4-2

Follow My Example 4-4

  • Owner’s equity5.Current asset

  • Current asset6.Current liability

  • Long-term liability7.Property, plant, and equipment

  • Property, plant, and equip.8.Current liability

For Practice: PE 4-4A, PE 4-4B

28


0

4-3

Objective 3

Prepare closing entries.


0

4-3

Accounts that are relatively permanent from year to year are called realaccounts. Accounts that report amounts for only one period are called temporary accounts or nominal accounts.


0

4-3

To report amounts for only one period, temporary accounts should have zero balances at the beginning of the period. At the end of the period the revenue and expense account balances are transferred to Income Summary.


0

4-3

The balance of Income Summary is then transferred to the owner’s capital account. The balance of the owner’s drawing account is also transferred to the owner’s capital account. The entries that transfer these balances are called closing entries.


0

4-3

33


Fees Earned

Bal.16,840

0

4-3

Debit each revenue account for the amount of its balance, and credit Income Summary for the total revenue.

Step 1:

16,840

Income Summary

Step 1

16,960

Rent Revenue

Bal.120

120

34


Bal.4,525

4,525

1,600

Bal.1,600

Bal.50

50

Bal.985

985

Bal.2,040

2,040

Insurance Expense

200

Bal.200

Miscellaneous Expense

455

Bal.455

4-3

Wages Expense

Income Summary

9,855

16,960

Rent Expense

Depreciation Expense

Utilities Expense

Step 2

Debit Income Summary for the total expenses and credit each expense account for its balance.

Supplies Expense

35


Step 3

Debit Income Summaryfor the amount of its balance (in this case, the net income) and credit the capital account.

Chris Clark, Capital

Bal.25,000

Chris Clark, Drawing

Bal.4,000

4-3

Income Summary

9,855

16,960

7,105

7,105

36


Step 4

Debit the capital account for the balance of the drawing account, and credit drawing for the same amount.

Chris Clark, Capital

Bal.25,000

7,105

Chris Clark, Drawing

Bal.4,000

4-3

4,000

4,000

37


0

4-3

Step 1

Step 2

Step 3

Step 4

38


0

4-3

After the closing entries are posted, all of the temporary accounts have zero balances.


Example Exercise 4-4

Example Exercise 4-5

0

4-3

The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007, balance sheet of Hindsight Consulting.

After the accounts have been adjusted at July 31, the end of the fiscal year, the following balances are taken from the ledger of Cabriolet Services Co.

Terry Lambert, Capital$615,850

Terry Lambert, Drawing25,000

Fees Earned380,450

Wages Expense250,000

Rent Expense65,000

Supplies Expense18,250

Miscellaneous Expense6,200

Journalize the four entries required to close the accounts.

40


Follow My Example 4-5

0

4-3

July 31Fees Earned380,450

Income Summary380,450

31Income Summary339,450

Wages Expense250,000

Rent Expense65,000

Supplies Expense18,250

Miscellaneous Expense6,200

31Income Summary41,000

Terry Lambert, Capital41,000

31Terry Lambert, Capital25,000

Terry Lambert, Drawing25,000

41

For Practice: PE 4-5A, PE 4-5B


NetSolutions

Post-Closing Trial Balance

December 31, 2007

Cash2 065 00

Accounts Receivable2 720 00

Supplies760 00

Prepaid Insurance2 200 00

Land20 000 00

Office Equipment1 800 00

Accumulated Depreciation50 00

Accounts Payable900 00

Wages Payable250 00

Unearned Rent240 00

Chris Clark, Capital28 105 00

29 545 0029 545 00

0

4-3

Exhibit 7 Post-Closing Trial Balance

42


0

4-4

Objective 4

Describe the accounting cycle.


0

4-4

The accounting process that begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period’s transactions is called the accounting cycle. There are ten steps in the accounting cycle.


0

4-4

The Accounting Cycle

  • Transactions are analyzed and recorded in the journal.

  • Transactions are posted to the ledger.

  • An unadjusted trial balance is prepared.

  • Adjustment data are assembled and analyzed.

  • An optional end-of-period spreadsheet (work sheet) is prepared.

Continued


0

4-4

  • Adjusting entries are journalized and posted to the ledger.

  • An adjusted trial balance is prepared.

  • Financial statements are prepared.

  • Closing entries are journalized and posted to the ledger.

  • A post-closing trial balance is prepared.


Example Exercise 4-4

Example Exercise 4-6

0

4-4

The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007, balance sheet of Hindsight Consulting.

From the following list of steps in the accounting cycle, identify what two steps are missing.

  • Transactions are analyzed and recorded in the journal.

  • Transactions are posted to the ledger.

  • Adjustment data are assembled and analyzed.

  • An optional end-of-period spreadsheet (work sheet) is prepared.

  • Adjusting entries are journalized and posted to the ledger.

  • Financial statements are prepared.

  • Closing entries are journalized and posted to the ledger.

  • A post-closing trial balance is prepared.

21

47


Follow My Example 4-6

0

4-4

The following two steps are missing: (1) the preparation of an unadjusted trial balance and (2) the preparation of the adjusted trial balance. The unadjusted trial balance should be prepared after step (b). The adjusted trial balance should be prepared after step (e).

48

For Practice: PE 4-6A, PE 4-6B


0

4-5

Objective 5

Illustrate the accounting cycle for one period.

Refer to the textbook for this extended illustration.


0

4-6

Objective 6

Explain what is meant by the fiscal year and the natural business year.


0

4-6

The annual accounting period adopted by a business is known as its fiscal year.When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the natural year.


0

4-6

Financial History of a Business

The financial history of a business may be shown by a series of balance sheets and income statements, as displayed below.

52


0

Appendix

End-of-Period Spreadsheet (Work Sheet)


0

The end-of-period spreadsheet (work sheet) shown in the following slides does not have the usual spreadsheet headings due to space constraints.


0

UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash2,065

Accounts Receivable2,220

Supplies2,000

Prepaid Insurance2,400

Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340

Wages Expense4,275

Rent Expense1,600

Utilities Expense985

Supplies Expense800

Miscellaneous Expense455

42,60042,600

The unadjusted trial balance is checked for equality.

55


0

UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash2,065

Accounts Receivable2,220

Supplies2,000

Prepaid Insurance2,400

Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340

Wages Expense4,275

Rent Expense1,600

Utilities Expense985

Supplies Expense800

Miscellaneous Expense455

42,60042,600

(a) 1,240

Cost of supplies on hand at end of period is $760.

(a) 1,240

56


Accounts are added as needed.

0

UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash2,065

Accounts Receivable2,220

Supplies2,000(a) 1,240

Prepaid Insurance2,400

Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340

Wages Expense4,275

Rent Expense1,600

Utilities Expense985

Supplies Expense800(a) 1,240

Miscellaneous Expense455

42,60042,600

(b) 200

The insurance expense for December is $200 ($2,400/12)

Insurance Expense(b) 200

57


0

UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash2,065

Accounts Receivable2,220

Supplies2,000(a) 1,240

Prepaid Insurance2,400(b) 200Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340

Wages Expense4,275

Rent Expense1,600

Utilities Expense985

Supplies Expense800(a) 1,240

Miscellaneous Expense455

42,60042,600

Rent revenue earned during December was $120.

(c) 120

Insurance Expense(b) 200

58

Rent Revenue(c) 120


0

UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash2,065

Accounts Receivable2,220

Supplies2,000(a) 1,240

Prepaid Insurance2,400(b) 200Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360(c) 120

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340

Wages Expense4,275

Rent Expense1,600

Utilities Expense985

Supplies Expense800(a) 1,240

Miscellaneous Expense455

42,60042,600

Wages accrued but not paid at the end of December totaled $250.

(d) 250

Insurance Expense(b) 200

Rent Revenue (c) 120

59

Wages Payable(d) 250


0

UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash2,065

Accounts Receivable2,220

Supplies2,000(a) 1,240

Prepaid Insurance2,400(b) 200Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360(c) 120

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340

Wages Expense4,275(d) 250

Rent Expense1,600

Utilities Expense985

Supplies Expense800(a) 1,240

Miscellaneous Expense455

42,60042,600

(e) 500

Fees accrued at the end of December but not recorded total $500.

(e) 500

Insurance Expense(b) 200

Rent Revenue (c) 120

Wages Payable(d) 250

60


0

UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash2,065

Accounts Receivable2,220(e) 500

Supplies2,000(a) 1,240

Prepaid Insurance2,400(b) 200Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360(c) 120

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340(e) 500

Wages Expense4,275(d) 250

Rent Expense1,600

Utilities Expense985

Supplies Expense800(a) 1,240

Miscellaneous Expense455

42,60042,600

Depreciation of office equipment is $50 for December.

Insurance Expense(b) 200

Rent Revenue (c) 120

Wages Payable(d) 250

61

Depreciation Expense(f) 50

Accum. Depreciation(f) 50


0

UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash2,065

Accounts Receivable2,220(e) 500

Supplies2,000(a) 1,240

Prepaid Insurance2,400(b) 200Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360(c) 120

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340(e) 500

Wages Expense4,275(d) 250

Rent Expense1,600

Utilities Expense985

Supplies Expense800(a) 1,240

Miscellaneous Expense455

42,60042,600

To make more space, let’s remove the heading.

Insurance Expense(b) 200

Rent Revenue (c) 120

Wages Payable(d) 250

Depreciation Expense(f) 50

Accum. Depreciation(f) 50

62


UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,065

Accounts Receivable2,220(e) 500

Supplies2,000(a) 1,240

Prepaid Insurance2,400(b) 200Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360(c) 120

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340(e) 500

Wages Expense4,275(d) 250

Rent Expense1,600

Utilities Expense985

Supplies Expense800(a) 1,240

Miscellaneous Expense455

42,60042,600

Insurance Expense(b) 200

Rent Revenue (c) 120

Wages Payable(d) 250

Depreciation Expense(f) 50

Accum. Depreciation(f) 50

2,3602,360

Summed and ruled

63


0

The next step is to add or subtract the adjustments from (to) the amounts found in the Unadjusted Trial Balance columns and enter the results in the Adjusted Trial Balance columns.


UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,065

Accounts Receivable2,220(e) 500

Supplies2,000(a) 1,240

Prepaid Insurance2,400(b) 200Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent360(c) 120

Chris Clark, Capital25,000

Chris Clark, Drawing4,000

Fees Earned16,340(e) 500

Wages Expense4,275(d) 250

Rent Expense1,600

Utilities Expense985

Supplies Expense800(a) 1,240

Miscellaneous Expense455

42,60042,600

Insurance Expense(b) 200

Rent Revenue (c) 120

Wages Payable(d) 250

Depreciation Expense(f) 50

Accum. Depreciation(f) 50

2,3602,360

65


UnadjustedAdjusted

Trial Balance Adjustments Trial Balance

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,0652,065

Accounts Receivable2,220(e) 5002,720

Supplies2,000(a) 1,240760

Prepaid Insurance2,400(b) 2002,200Land20,00020,000

Office Equipment1,8001,800

Accounts Payable900900

Unearned Rent360(c) 120240

Chris Clark, Capital25,00025,000

Chris Clark, Drawing4,0004,000

Fees Earned16,340(e) 50016,840

Wages Expense4,275(d) 2504,525

Rent Expense1,6001,600

Utilities Expense985985

Supplies Expense800(a) 1,2402,040

Miscellaneous Expense455455

42,60042,600

Insurance Expense(b) 200 200

Rent Revenue (c) 120120

Wages Payable(d) 250250

Depreciation Expense(f) 5050

Accum. Depreciation(f) 5050

2,3602,36043,40043,400

66


0

Because of space constraints, the Unadjusted Trial Balance and the Adjustments columns will not be shown in the following slides.


Adjusted

Trial Balance Income Statement Balance Sheet

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,065

Accounts Receivable2,720

Supplies760

Prepaid Insurance2,200

Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent240

Chris Clark, Capital25,000Chris Clark, Drawing4,000

Fees Earned16,840

Wages Expense4,525

Rent Expense1,600

Utilities Expense985

Supplies Expense2,040

Miscellaneous Expense455

Insurance Expense200

Rent Revenue 120

Wages Payable250

Depreciation Expense50

Accum. Depreciation5043,40043,400

68


0

The next step is to extend amounts in the Adjusted Trial Balance columns to the Income Statement and Balance Sheet columns.


Adjusted

Trial Balance Income Statement Balance Sheet

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,065

Accounts Receivable2,720

Supplies760

Prepaid Insurance2,200

Land20,000

Office Equipment1,800

Accounts Payable900

Unearned Rent240

Chris Clark, Capital25,000Chris Clark, Drawing4,000

Fees Earned16,840

Wages Expense4,525

Rent Expense1,600

Utilities Expense985

Supplies Expense2,040

Miscellaneous Expense455

Insurance Expense200

Rent Revenue 120

Wages Payable250

Depreciation Expense50

Accum. Depreciation5043,40043,400

70


Adjusted

Trial Balance Income Statement Balance Sheet

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,0652,065

Accounts Receivable2,7202,720

Supplies760760

Prepaid Insurance2,2002,200

Land20,00020,000

Office Equipment1,8001,800

Accounts Payable900900

Unearned Rent240240

Chris Clark, Capital25,00025,000Chris Clark, Drawing4,0004,000

Fees Earned16,84016,840

Wages Expense4,5254,525

Rent Expense1,6001,600

Utilities Expense985985

Supplies Expense2,0402,040

Miscellaneous Expense455455

Insurance Expense200200

Rent Revenue 120120

Wages Payable250250

Depreciation Expense5050

Accum. Depreciation505043,40043,400

71


0

The Income Statement and Balance Sheet columns are totaled.


Adjusted

Trial Balance Income Statement Balance Sheet

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,0652,065

Accounts Receivable2,7202,720

Supplies760760

Prepaid Insurance2,2002,200

Land20,00020,000

Office Equipment1,8001,800

Accounts Payable900900

Unearned Rent240240

Chris Clark, Capital25,00025,000Chris Clark, Drawing4,0004,000

Fees Earned16,84016,840

Wages Expense4,5254,525

Rent Expense1,6001,600

Utilities Expense985985

Supplies Expense2,0402,040

Miscellaneous Expense455455

Insurance Expense200200

Rent Revenue 120120

Wages Payable250250

Depreciation Expense5050

Accum. Depreciation505043,40043,400

73


Adjusted

Trial Balance Income Statement Balance Sheet

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,0652,065

Accounts Receivable2,7202,720

Supplies760760

Prepaid Insurance2,2002,200

Land20,00020,000

Office Equipment1,8001,800

Accounts Payable900900

Unearned Rent240240

Chris Clark, Capital25,00025,000Chris Clark, Drawing4,0004,000

Fees Earned16,84016,840

Wages Expense4,5254,525

Rent Expense1,6001,600

Utilities Expense985985

Supplies Expense2,0402,040

Miscellaneous Expense455455

Insurance Expense200200

Rent Revenue 120120

Wages Payable250250

Depreciation Expense5050

Accum. Depreciation505043,40043,4009,85516,96033,54526,440

74


0

The net income or net loss is determined. Then the Income Statement and Balance Sheet columns are totaled and double-ruled.


Adjusted

Trial Balance Income Statement Balance Sheet

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,0652,065

Accounts Receivable2,7202,720

Supplies760760

Prepaid Insurance2,2002,200

Land20,00020,000

Office Equipment1,8001,800

Accounts Payable900900

Unearned Rent240240

Chris Clark, Capital25,00025,000Chris Clark, Drawing4,0004,000

Fees Earned16,84016,840

Wages Expense4,5254,525

Rent Expense1,6001,600

Utilities Expense985985

Supplies Expense2,0402,040

Miscellaneous Expense455455

Insurance Expense200200

Rent Revenue 120120

Wages Payable250250

Depreciation Expense5050

Accum. Depreciation505043,40043,4009,85516,96033,54526,440

76


Adjusted

Trial Balance Income Statement Balance Sheet

77

0

Account TitleDebitCreditDebitCreditDebitCredit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash2,0652,065

Accounts Receivable2,7202,720

Supplies760760

Prepaid Insurance2,2002,200

Land20,00020,000

Office Equipment1,8001,800

Accounts Payable900900

Unearned Rent240240

Chris Clark, Capital25,00025,000Chris Clark, Drawing4,0004,000

Fees Earned16,84016,840

Wages Expense4,5254,525

Rent Expense1,6001,600

Utilities Expense985985

Supplies Expense2,0402,040

Miscellaneous Expense455455

Insurance Expense200200

Rent Revenue 120120

Wages Payable250250

Depreciation Expense5050

Accum. Depreciation505043,40043,4009,85516,96033,54526,440

Net income7,1057,105

16,96016,96033,54533,545


Income Statement Balance Sheet

9,85516,96033,54526,440

7,1057,105

16,96016,96033,54533,545

Net Income

Net Income

0

The difference between the Income Statement column totals is the net income (or net loss) for the period.

78


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